March 2019

Corporate Advisory Bulletin February 2019

In the media

Subway franchisee penalised $65,000

The Fair Work Ombudsman has secured $65,438 in penalties in Court against the former franchisee of two Subway outlets in Sydney for underpaying a Chinese worker more than $16,000. Sandra Parker, Fair Work Ombudsman, said “the penalty should send a message to fast food businesses that compliance in the workplace is not an option – it’s the law.”

ASIC has welcomed the passing of the Treasury Laws Amendment (Enhancing Whistleblower Protections) Bill 2018, approved by Parliament late on 19 February 2019. The reforms significantly improve the protections available for whistleblowers who report company misconduct.

In Practice and Courts

The ASX Corporate Governance Council (Council) has today released the fourth edition of its Corporate Governance Principles and Recommendations. It has the same structure – eight core principles, supporting recommendations, and commentary with guidance on implementing the recommendations.

For more information on the ASX Corporate Governance Council, please click here:

AFSA: PPSR Small Business Roundtable

The key themes that emerged from our market research, anecdotal feedback, and these discussions were: a lack of awareness of the PPSR amongst the small business sector; a lack of support for small business to effectively use the Register; the complexity of the legislation, the concepts and the Register itself; enforcement – being able to enforce the security interest.

Cases

The ACCC has successfully prosecuted former car wash franchisor, Geowash Pty Ltd (Geowash) after launching an investigation in 2015.

Prior to entering voluntary administration in October 2016, Geowash offered hand car wash and detailing franchises across four Australian states.

After investigating Geowash, the ACCC launched court proceedings against Geowash for actively misleading its franchisees.

The Federal Court found that Geowash made false or misleading representations on its website by:

stating that prospective franchisees could make an average revenue of $70,216 per month, and gross average profit of $30,439, when Geowash had no reasonable basis for this claim; and

representing that it had a commercial relationship or affiliation with major corporate companies including Nissan, Kia, Renault, Audi, Emirates, Shell, Hertz, Holden, Ikea and Thrifty, when it did not have such a relationship.

The Federal Court also found that Geowash:

had acted unconscionably by charging franchisees a different establishment costs pending on what the franchisees were willing to pay;

created false impressions about how costs charged to the franchisees would be allocated, when majority of such costs went to Geowash’s commission payments; and

had engaged in conduct that involved a failure to act in good faith as required under the Franchising Code.

A hearing to determine penalties and other orders sought by the ACCC will be fixed for a later date.

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From origins in Melbourne in 1864, Mills Oakley has grown to become a domestic leader in legal services with a client base of ASX-200 listed companies, mid-sized corporations, the public sector and not-for-profit organisations.